SKPETRO 沙肯石油 5218 SapuraKencana Petroleum Berhad
Mar 25, 2015
Target RM3.14 (Stock Rating: ADD)
SapuraKencana’s FY1/15 record core net profit met expectations at 101% of our forecast and 103% of consensus, fuelled mostly by contributions from SKEI and Seadrill assets. But the company is in for more challenging times this year given the low oil price environment that is far from ideal for SKEI. Our target price drops as we lower our FY1/16-17 EPS on the assumption that SKEI breaks even at US$60/barrel. We continue to value the stock at 15x CY16 P/E, on par with our target market P/E. SapuraKencana remains an Add and our top oil & gas big-cap pick, with the Shariah-compliant status confirmation and strong order book momentum as potential re-rating catalysts.
FY15 core net profit surges 50% yoy
Excluding RM193m one-offs booked in 4Q15, SapuraKencana’s FY15 core net profit surged 50% yoy to an all-time high, thanks to first full-year contributions from Seadrill’s rigs and SapuraKencana Energy Inc.'s (SKEI or formerly Newfield) oil fields. The full-year DPS of 4.35 sen met expectations.
Trying times for SKEI
The fabrication, hook-up and commissioning (FHUC) segment recorded a contraction, but the offshore construction and subsea services (OCSS) and drilling and energy services (DES) segments registered growth, with the main contributors being SKEI and Seadrill assets that were acquired in Feb 2014 and Apr 2013, respectively. Riding on high oil prices, SKEI had a good run in 9M15, but it was adversely affected by the sharp oil price decline in 4Q15. Based on the assumption that SKEI breaks even at US$60/barrel, we cut our EPS by 32% for FY16 and 30% for FY17, conservatively removing SKEI from our forecasts. Nonetheless, we note that should the oil prices turn, SKEI would benefit from this directly and significantly.
RM25.7bn order book and RM15bn tender book
SapuraKencana’s order book currently stands at RM25.7bn. The order book is set to grow as management scouts for more contracts, including one for Teknik Berkat, which is idle. Management said during the post-results briefing that it is hopeful of securing a contract for the rig as it bids for RM15bn worth of new jobs. See overleaf for more briefing highlights.
Source: CIMB Daybreak - 25 March 2015
